Zambia’s proposed mining tax increases would hobble Africa’s second biggest copper industry, companies said on Thursday, a further warning to investors already concerned about the country’s mounting debt.
Several mines would become unprofitable if the tax plans were implemented with overall copper production likely to fall, Zambia Chamber of Mines President Nathan Chishimba said.
“More tax regime instability, massive increases, and novel taxes not seen anywhere else in the world, will hurt the mining industry and all those who rely on its success,” Chishimba said in a statement.
“As industry production shrinks through the impact, there will be less jobs, less taxes and as a result there will be less in the government’s bank account for many years to come.”
Unfairly benefits foreign companies
Some companies have already scrapped expansion plans since Zambia on Friday announced new mining duties and an increase in royalties to help bring down mounting debt, Chishimba said.
Zambia argues that its mainstay copper industry unfairly benefits foreign companies like First Quantum, Glencore and Vedanta Resources, while millions of its citizens suffer without basic services.
Chishimba said attracting investment was the only way to boost growth and increase government revenue. Mining accounts for more than 70% of Zambia’s foreign exchange earnings.
Concerns about Zambia’s rising debt, alongside accusations of additional hidden borrowing and government corruption, have spooked investors and Western donors in recent months.
The International Monetary Fund has put on hold talk about an aid package due to Zambia’s debts that it describes as unsustainable.